“”That’s a x#$% rip-off!” I shouted.
“Why do I have to pay 40% in taxes on the amount I earned extra this year?!“
That’s how a recent conversation with my own accountant went this past week. My accountant was surprised I reacted that way. I’m sure he was thinking, “Please don’t shoot the messenger.”
Needless to say I was astonished, worried and damn angry. I barely made about a fraction more than last year. On that amount the federal, state and local taxes amounted to 40%! I’m still in shock as I write that percentage!
Taxes are painful for everyone, but the self-employed get a special kind of tax hell.
While it is true there are a ton of tax breaks for the self-employed, we still are responsible for all the Social Security and Medicare taxes. It’s not unusual to pay 40-50%. Then top that off with having to pay for your own benefits like health insurance and retirement….it’s enough to make you want to work for someone again.
Not to mention, imagine having to guesstimate what you’ll make every quarter of every year. Then, you have to estimate just how much money to put aside for quarterly taxes. The real cherry on top for me this year is that I did all this, and I still owed a bazillion bucks! Well, maybe not that much. It sure feels like it though.
So what can a self-employed person do to make taxes less painful?….
For David’s recommendation to make self-employment taxes less painful, read the rest of the story at Self-Employment Taxes Are a Special Kind of Hell